By AP Economics Writer Christopher Al Gerber
WASHINGTON (AP) — The Federal Reserve has not changed its major short-term interest rates this year, cutting off repeated calls from President Donald Trump.
The Fed’s decision on Wednesday left the key short-term rate at around 4.3%, standing after the central bank made three cuts last year. Speaker Jerome Powell said the Fed is likely already cutting cuts if Trump didn’t have drastic tariffs. Powell and other Fed officials say they want to see how Trump’s obligations to imports affect inflation and the wider economy. So far, while less than many economists expected, the duties have reduced the costs of some products, such as furniture, furniture and toys, and have increased the overall inflation slightly.
There were several signs of division in the federal ranks. Governor Christopher Waller and Michelle Bowman voted to reduce borrowing costs, but nine officials, including Powell, supported the standing putt. This is the first time in more than 30 years that two of the seven Washington-based governors have objected. One staff member, Gov. Adriana Coogler, was absent and did not vote.
The choice to curb rate cuts will almost certainly bring further conflict between the Fed and the White House as Trump repeatedly demanded central banks cut borrowing costs as part of their efforts to control one of the few remaining independent federal agencies.
At a press conference, Powell said the prices of the services (rentals, insurance and hotel rooms) continue to cool, while tariffs are beginning to push up the costs of the goods.
He suggested it would take some time to determine whether tariffs have a one-off effect or are increasing prices more permanently.
“I think we have a long way to go to really understand how tariffs and prices unfold,” Powell said.
Many economists and Wall Street investors are hoping the Fed will cut that rate at its next meeting in September, but Powell’s remarks suggest that there may not be enough data to support the cut before September.
“We didn’t make any decisions about September,” Powell said.
The US major index, which had a slightly higher trade on Wednesday, went negative after Powell’s comments.
Trump has argued that prices should be lowered as the US economy is on track. However, unlike blue-chip companies, which usually pay lower fees than problematic startups, the Fed is more likely to adjust interest rates to slower or increase in speeds, and if the economy is strong to prevent inflation from occurring, it is more likely to keep them high.
This photo combo shows Christopher Waller, a member of Christopher Waller, from left, on May 23, 2022, May 23, 2022, Wednesday, June 25, 2025, Christopher Waller, Vice-Chairman of the Federal Governor’s Committee, in Washington, on Wednesday, June 25, 2025. (AP Photos/File)
Files – Michelle Bowman, vice-chairman for oversight for the Federal Presidents’ Committee, sat in Washington on Wednesday, June 25th, 2025, in Washington, in front of a public meeting of the Federal Reserve Presidents. (AP Photo/Mark Schiefelbein, file)
File – Federal Reserve member Christopher Waller will take a photo in Washington on May 23, 2022. (AP Photo/Patrick Semansky, file)
File – On Thursday, July 24th, 2025, President Donald Trump visits the Federal Reserve in Washington, Federal Reserve Chairman Jerome Powell listens. (AP Photo/Julia Demarie Nikinson, File)
President Donald Trump to the left, on Thursday, July 24, 2025, Federal Reserve Chairman Jerome Powell takes off his hard hat as he watches ongoing construction in Washington’s Federal Reserve system. (AP Photo/Julia Demarie Nikinson)
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This photo combo shows Christopher Waller, a member of Christopher Waller, from left, on May 23, 2022, May 23, 2022, Wednesday, June 25, 2025, Christopher Waller, Vice-Chairman of the Federal Governor’s Committee, in Washington, on Wednesday, June 25, 2025. (AP Photos/File)
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Earlier on Wednesday, the government said the economy expanded at a healthy 3% annual rate in the second quarter, following negative readings in the year, which shrunk by 0.5% at the annual rate for the first three months of the year. Most economists averaged two numbers to get a growth rate of around 1.2% in the first half of this year.
Some of the differences likely reflect the jockey who will replace Powell, who ended in May 2026.
Meanwhile, Bowman last opposed it in September 2024. She said she preferred a quarter point cut instead, citing the fact that inflation still exceeds 2.5% as a reason for caution.
Waller also said he supports the cuts earlier this month, but for very different reasons than Trump cited, Waller believes growth and employment are slowing, and the Fed should cut borrowing costs to prevent an economic weaker economy and increased unemployment.
The Fed’s 19-person pricing committee has other camps (actually only 12 of the 19 people who vote for the rate decision). In June, the seven members signalled that they supported changing the fees they would have left by the end of this year, but the two suggested they prefer to cut interest rates once this year. The other half supported more cuts, eight staff supported two cuts, and two (widely considered Waller and Bowman) supported three cuts.
If President Donald Trump appointed an alternative that drives the much lower interest rates the White House wants, opposition could be a preview of what could happen after Powell resigns. If other chairs try to cut fees more than the economic situation supports, other Fed officials can push back.
Overall, the committee’s quarterly forecast for June suggested the Fed would cut twice this year. There will only be three more Fed policy meetings in September, October and December.
When the Fed cuts that rate, it often, but not always, lowers the cost of borrowing mortgages, car loans and credit cards.
Some economists agree with Waller’s concerns about the job market. Excluding government employment, the economy added just 74,000 jobs in June, with most of them occurring in healthcare.
“We work much slower than most people appreciate,” said Tom Polcelli, chief economist at PGIM bonds.
In a note to clients this week, JPMorgan Chase economist Michael Feroli said the pair would “say more about auditions for the Federal Reserve appointment than about the economic situation.”
The Fed’s two-day meeting comes after a week of extraordinary interaction with the Trump White House. This accuss Powell of mismanaged a widespread $2.5 billion renovation of two office buildings. Two weeks ago, Trump suggested that rising costs on the project could be a “fire crime,” but later retarded the characterization.
In particular, Trump argues that the Fed should cut because the economy is on a very good pace. This is a different perspective than almost every economist who says that a healthy, growing economy doesn’t need speed reductions.
“If your economy is hot, you should have a high short-term rate,” Polcelli said.
Original issue: July 30th, 2025, 11:36am EDT
